Well, here we go again. President Joe Biden launched a rock-solid defense of his tax plan last week built around two points: The rich cheat and the IRS can’t catch them. As a result, the richest 1% evaded $ 160 billion in taxes, he said.
Tax evasion exists, but also tax evasion, which is legal and the result of a messy, confusing and sometimes contradictory tax code.
But whose fault is it? The rich? A struggling middle class? Low-income Americans?
The answer is Congress, Republicans and Democrats, and more decades than we can count.
Over the past two decades, Congress has drained the enforcement force of the Internal Revenue Service, and some Republicans have called for the elimination of the IRS, as if no IRS meant no taxes. We agree that many Americans are overtaxed and underserved. But the government has to do something, and collecting revenue under another name is still collecting revenue.
The real hurdle is that Democratic and Republican lawmakers, and the lobbyists who authorize them, see the tax code through myopic political lenses that too often view supporting corporate tax breaks and spending on social programs as poles. mutually exclusive opposites. Neither approach on its own promotes fairness or even coherent goals, but allows for tax benefits as political favors for vested interests, often in the form of deductions, credits, and exclusions.
The tax code will remain a fertile battleground for powerful lobbyists unless Congress is willing to change the conversation to make the tax code simpler and fairer, while generating sufficient revenue for the nation to function and be. internationally competitive.
These goals do not necessarily have to be mutually exclusive. Some tax provisions are valid and some are of questionable merit, and this applies to virtually all income levels. And some provisions are more important than the budgets of entire programs, or even entire departments spending money for these purposes. The first of these is the mortgage deduction break for homeowners.
The Biden administration and progressive Democrats cannot continue to view taxpayers as victims and tormentors, nor can Republicans view the taxation necessary to support the function of government as anti-capitalist or even anti-American. The current tax system rewards narrow political considerations that distort tax policy and economic decisions, and it increases the possibilities of tax evasion, tax evasion and misrepresentation.
Leadership in tax reform requires more than playing around with tax rates and brackets. In an opinion piece published earlier this year, former Treasury Secretaries Timothy Geithner, Jacob Lew, Henry Paulson, Robert Rubin and Lawrence Summers warned that taxes legally owed, but not collected, stand at around $ 600 billion. dollars per year. That’s about two-thirds of discretionary non-defense spending, and it’s expected to reach $ 7 trillion over the next decade, say the five men who have worked for the Democratic and Republican presidents.
The tax code must be reformed to streamline deductions and reduce complexity to intelligently encourage investment, improve compliance, and reconnect Wall Street to Main Street. Otherwise, the fiscal battles will become more and more bitter and confrontational.